Honest money, the dollar, and South Carolina

The South Carolina Legislature, with S.862, and H.4128, may turn back the clock on central government economic power. The bills’ stated goal:

To amend the code of laws of South Carolina, 1976, by adding article 18 to chapter 1, title 1 so as to provide that gold or silver coin, or both, shall be legal tender in this state for payment of certain debts; and by adding article 26 to chapter 1, title 1 so as to establish a join committee for the adoption of a alternate form of currency.

Reintroducing gold and silver as money can kill the engine of central government growth.

Once upon a time, the dollar was simply defined as 1/20-ounce of gold. “Dollar” was simply a familiar name for a convenient quantity of a universally valued commodity.

Likewise, the British Pound was 1/4-ounce of gold, as well as a pound of silver. The different names were nationalistic, patriotic, or just cultural names for a given amount of gold. Gold and silver are hard (read honest, unmanipulable) money.

The beauty of this naturally evolved situation was that the value of money was stable, because the quantity of gold (money) couldn’t be changed rapidly. Gold mining is hard work, after all. The stable quantity made for a very good accounting tool, with which to price everything we buy and sell. This allowed us to make wise economic decisions that made everyone wealthier.

Money is a commodity, but a special one. More money doesn’t equal more wealth. Read “What Has Government Done to Our Money?,” by Murray N. Rothbard, for a thorough explanation. You can download if for free.

Why does it take so many more dollars to buy something now?

Our rulers, and the all-too-cooperative banks, understood that if they could create new money, position themselves to spend it first (at yesterday’s prices), they would have more economic power than everyone else.

Enter the Central Bank, or Federal Reserve System. Enter INFLATION. Creating new money is inflation of the money supply. That causes prices to go up, or in other words, the value of a dollar to go down. The purchasing power has been diluted. You have been robbed. In a world of ever increasing production efficiencies, prices go down. High tech is exhibit A. It gets better faster than the FED prints money, so prices go down as quality goes up. Not so, agriculture.

What is a dollar today, and where did they all come from?

It’s just a digit in the ‘ones’ column of a bank ledger. Sometimes the Federal Reserve take the trouble to have some printed on paper, but there is still no tangible value. The cultural legacy and society’s memory of what it once was are all that allow us to trust it. Legal Tender laws–the central government telling us we have to use it–make it viable. We live in a world of Fiat money–it’s money because the government says it is, and they get all they want. You still have to earn yours.

How do we stop inflation?

Return to gold (or silver). Government can’t manipulate its quantity, so inflation is impossible. They can alloy it with other metals in coins like the Romans did, but that’s easily detectable in today’s world. Mr. Rothbard explained how to make the transition from fiat to hard money, as have many others.

Do we want to?

Yes. Inflation is just stealthy taxation. Also, if any of us did what the FED does, we would be called counterfeiters.

Support this legislation. It’s not perfect, but it’s a start. For the first time in a lifetime, it associates gold with day-to-day financial transactions. South Carolina agreed not to coin money when it ratified the Constitution, but also refused to accept anything other than gold or silver as payment. Ultimately, we must force the central government to pay its bills in gold or silver, if we hope to restrain it.

4 thoughts on “Honest money, the dollar, and South Carolina”

In the event that this or a similar legislation goes through, what does that mean for the money that we currently have? In other words, are those who still have the currency that we're using now going to find themselves without usable funds? Another thought: as with all commodities, gold and silver only have value because society ascribes that value to them. If gold and silver were easy to come by, if they couldn't be refined and turned into jewelry and other pretty things, they would certainly be valued less than they are now. Is not all currency, regardless of the appearance of it and how it is made and used, symbolic in essence: with designated, rather than inherent, value?

The only question is how do we pay the huge numbers that the GDP is made up of with a very limited supply of metals? For instance, with gold at $ 1,500 per Oz how do you pay for a $ 2.00 burger? 2/1500 of an ounce is very small?

If gold backed every "dollar" printed by the government, burgers would not cost $2.00 any longer. Voluntary exchange between willing buyers and seller would 'reset' prices to reflect the value of gold.